Consumers shopping for televisions and other electronic gadgets this holiday season are being greeted at many retail outlets by representatives from their local cable companies, who are looking to sell them everything from HDTV programming packages to cable-modem services.
These campaigns from Comcast Corp., Cox Communications Inc. and other operators aren't groundbreaking. Since its inception, DirecTV Inc. has contracted firms around the holidays and other high-traffic periods to place sales representatives in electronics stores to help sell its direct-broadcast satellite programming packages.
But with DBS companies continuing to eat into the cable industry's market share, some major cable companies are looking to expand their retail presence in hopes of selling new services to consumers who are shopping for HDTV sets, computers and other devices.
"I think it's an opportunity for us to sell more product," said Time Warner Cable vice president of sales channel development Charles Haugabrook, whose company cut a deal with Pioneer Electronics Corp. in November that gives consumers who buy a Pioneer HDTV a $500 rebate, six free months of Time Warner's HDTV package and other perks. The promotion is running at Best Buy, Circuit City, Comp USA, Sears, Tweeter, Ultimate Electronics and more than 1,000 smaller retailers.
One of the biggest challenges for cable companies and retailers is getting consumers used to the idea that they can buy cable services in retail outlets, where traditionally only satellite products have been available.
"A big difference between satellite and digital cable is, satellite is a destination product for a lot of customers where they expect to go to a retailer to be educated on and ultimately purchase the system," said Best Buy associate product manager Seth Henriksen. "We're building that out for digital cable."
National retailers such as Best Buy stand to gain from cable's entrance into retail outlets, because they're given payments or bounties for every consumer that orders a cable programming package or high-speed data service in their stores.
In October, Cox began testing three different retail models with Circuit City and Best Buy on its systems in Northern Virginia, San Diego and Phoenix.
Cox is placing its direct-sales representatives, who normally handle door-to-door sales in Virginia, in high-traffic Circuit City and Best Buy stores to help sell Cox cable services. And in Phoenix, the MSO hired local college students and other temporary employees to don Cox golf shirts and pitch cable services in the retail outlets.
In San Diego, Cox hired a firm called Campaigners to place its employees in Best Buy and Circuit City stores.
"We're testing the waters to see what has the greatest impact. What our plans are is to review the performance of these three different models after the selling season is over — some time at the end of January or the middle of February — and evaluate it to see which is the most effective," said Cox manager or retail business development Steve Asbell.
"And from that we will make a recommendation to our markets or we'll provide a model for our markets to implement next year."
Of the three models, the Campaigners program in San Diego has been the most expensive to run, followed by the program with college students in Phoenix and the Northern Virginia test, which uses employees already on Cox's payroll, Asbell said.
Best Buy's Henriksen said Comcast has also placed employees in his company's retail outlets during high-traffic periods for several years.
Cable operators might run into some roadblocks as they look to craft new agreements with retailers, many of which have had contracts with DirecTV or EchoStar Communications Corp. for years.
DirecTV senior vice president of sales and distribution Jim Arnold said his company has deals with Best Buy and Circuit City that make it not only the exclusive satellite distributor in those stores, but also the exclusive multichannel-video vendor.
DirecTV could "potentially" assert its exclusive deals with Best Buy and Circuit City to thwart Cox's efforts in those stores, but the company has no plans to sound an alarm at this time, Arnold said.
"We have not asked them [Best Buy and Circuit City] not to allow [Cox] into the stores in this environment," Arnold said. "We're going to win based on both our agreements and based on the strength of our brand, the strength of our platform and the strength of our products."
DirecTV hires third parties to go into retail outlets on Fridays, Saturdays and Sundays during the holidays and other high-traffic periods to help sell satellite services. The employees are paid hourly, and don't cut into commissions of the sales representatives at the retail outlets, Arnold said.
The DBS company also has a staff of regional trainers that go into consumer-electronics stores to coach trainers that work for the CE companies on how to teach their sales teams to sell DirecTV products, Arnold said.
DirecTV also looks to educate retail sales representatives and consumers about its programming service and new products, such as TiVo-branded digital video recorders, by improving the displays that contain its DirecTV systems and materials that describe the services.
Keeping It Clear
"What we're focusing on a lot in 2003, and we'll continue in 2004, is to reinforce our training with merchandising. We're continuing to try to simplify the merchandising to make sure that the message is so crystal clear both to the consumer … but also as a way to educate the sales guys," Arnold said. "If it's simple, and they stare at it every day, they're going to learn it."
Earlier this year, when Circuit City switched its sales strategy from a commission-based approach to paying its sales staff hourly wages, DirecTV worked with Circuit City to revamp how DirecTV products are merchandised in the retail outlets, Arnold said. DirecTV sales in Circuit City stores increased after the DBS provider's sales team was invited in to help improve the merchandising.
Similar to DirecTV's training approach, Time Warner Cable pays BDS Marketing Inc. to send employees into Best Buy and Gateway Inc. computer stores to help train sales teams on selling Time Warner products and to improve merchandise displays, Haugabrook said.
"There's a dramatic increase in terms of the sales rate when we have those people calling on our stores versus stores where we don't have a presence like that," he added.
While consumers can go into many consumer electronics stores today and use kiosks to order new cable services, one advantage satellite has over cable at retail is that DirecTV and EchoStar sell their receivers in stores.
Cable operators still send technicians to homes to install set-tops that subscribers lease from their local operator.
Cox systems in Phoenix, Cleveland and Northern Virginia tested a model earlier this year in which consumers could buy HDTV set-tops from Scientific-Atlanta Inc. at Best Buy stores. But Cox scrapped the tests in August, and now only offers the leasing option to customers.
DirecTV also has tested cable's leasing model. In July, it began offering consumers the option to lease HDTV set-tops for $9.99 per month.
"While we found that it's been somewhat effective, we've found it was not overly compelling versus the sale paradigm for the consumer, because that's the paradigm they're used to, particularly in a CE retail store," Arnold said.